According to John Williams, central banks and governments must come up with new monetary and fiscal policies to kickstart a global economy which is barely growing (thanks to 7 years of flawed monetary policy). "We can wait for the next storm and hope for better outcomes or prepare for them now and be ready." As a result, Williams believes that a major fiscal stimulus thrust is now critical to propel the US economy higher. And he is, mostly, right. There is just one problem...
Real economists, if there were any, looking at the real economic picture would see an economy collapsing into widespread debt deflation and impoverishment. Debt deflation is when consumers after they service their debts have no discretionary income left with which to drive the economy with purchases. The reason that Americans have no income from their savings is that public authorities put the welfare of a handful of “banks too big to fail” above the welfare of the American people. The enormous liquidity created by the Federal Reserve has gone into the financial system where it has driven up the prices of financial instruments. There has been a stock market recovery but not an economic recovery.
In their most recent report, the so-called “trustees” of the social security system said that the trust fund’s near-term outlook had improved. So the stenographers of the financial press dutifully reported that the day of reckoning when the trust funds run dry has been put off another year - until 2034. The message was essentially take a breath and kick the can. That’s five Presidential elections away! Except that is not what the report really says...
"Zero interest rates and negative interest rates and Europe and Asia are a huge signal that we are almost at the point where central banks have lost their tools to perpetuate a sense of confidence, that things are cyclical.... If you were to apply the Bretton Woods model for valuing money today, gold would be up to $15,000 an ounce..."
Unfortunately, it appears too late to reverse the tidal wave of system failure that has been brewing for three decades now.But there is a sliver of hope.If Donald Trump is elected, eschews a law and order crusade and does not capitulate to the destructive policies of the Wall Street/Washington/bicoastal establishment, there is a way forward..
It is not surprising that after one of the longest cyclical bull markets in history that individuals are ebullient about the long-term prospects of investing. The ongoing interventions by global Cental Banks have led to T.I.N.A. (There Is No Alternative) which has become a pervasive, and “Pavlovian,” investor mindset. But therein lies the real story...
Needless to say, the above outlandish graph does not capture capitalism at work. Nor did the speculators who surfed upon this $45 trillion bubble harvest their monumental windfalls owing to investment genius. Instead, it is the perverted fruit of Bubble Finance, and there is no better illustration of this bubble surfer syndrome than the sainted Warren Buffett.
Monetary policy, we are told, is all about staving off recession and stimulating economic growth.However, not only is monetary debasement in any form counterproductive and destroys the personal wealth of the masses, but the economists who devised today’s monetarism have completely lost their way. The real reason for today’s global monetary policies is an ultimately futile attempt to prevent a systemic and economic crisis.
"Without growth, a credit-based economy ultimately devolves into Ponzi finance, and at some point implodes..... I don't like bonds; I don't like most stocks; I don't like private equity. Real assets such as land, gold, and tangible plant and equipment at a discount are favored asset categories."
Following last Friday's shocking weak US GDP print, Asian stocks jumped to an 11 month high on reduced prospects of a near-term rate hike, while the region also digested mostly encouraging in conflicting Chinese PMI data. European bank stocks initially rose following the release of the 2016 stress test then declined, tempering gains in global equity indexes, amid investor skepticism over the usefulness of stress-test results and weaker oil prices.
"On an annual basis, the non-consumer portion of the economy is shrinking not only in real terms but also in nominal terms." And it is about to get worse: "We should expect a sharp pullback in spending this quarter." Is the US on the verge of a full-blown economic slowdown?
In his latest Global Equity Strategy update piece, Credit Suisse strategist Andrew Garthwaite takes a random walk across Wall Street's trading desks, and confirms what many know: namely, that nobody actually knows anything.
In effect, America has undergone a rolling national LBO since the Gipper’s time in office; so the U.S. economy is now stuck in the ditch because it has leveraged itself to the hilt over the past three decades. The vast majority of Americans are no longer living the dream because Wall Street speculators and Washington politicians alike have led them into a debt-fueled fantasy world that is coming to a dead end.